Combining Uncorrelated Assets Will

question 46

Multiple Choice

Combining uncorrelated assets will

• A)increase the overall risk level of a portfolio.
• B)decrease the overall risk level of a portfolio.
• C)not change the overall risk level of a portfolio.
• D)cause the other assets in the portfolio to become positively related.

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Definitions:

Perfectly Elastic

Describes a situation where the quantity demanded or supplied can change infinitely with any small change in price.

Price

The total monetary value expected, obliged, or handed over in exchange for something.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a given price level in a specified period.

Table: Price Elasticity

A tabulated representation that shows how the quantity demanded of a good or service responds to changes in its price, indicating the sensitivity of consumers to price changes.